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Hot Wages: How Do Heat Waves Change the Earnings Distribution?

Author

Listed:
  • Giulia Valenti

    (Ca’ Foscari University of Venice and Fondazione Eni Enrico Mattei)

  • Francesco Vona

    (University of Milan and Fondazione Eni Enrico Mattei)

Abstract

This paper examines the impact of temperature shocks, measured by cold and heat waves, on labour market outcomes across 14 European countries. Using retrospective individual-level data from the Survey on Health, Ageing, and Retirement in Europe (SHARE) and daily climate data from the E-OBS dataset, we analyze the effect on wages and occupational transition. By leveraging plausibly exogenous weather shocks, we find that heat waves significantly reduce individual income, with losses accumulating over time. Moreover, our analysis documents that older individuals, those with severe health conditions, and workers in heat-exposed occupations experience particularly large income reductions. Losses are also more pronounced in Mediterranean and Eastern European countries, as well as in regions with less regulated wage-setting mechanisms. Additionally, our findings suggest that heat waves increase the likelihood of changing jobs and in particular to transition from heat-exposed to non-heat-exposed occupations. These results underscore the need for targeted policy interventions to mitigate economic losses and protect vulnerable workers in the face of increasing climate variability.

Suggested Citation

  • Giulia Valenti & Francesco Vona, 2024. "Hot Wages: How Do Heat Waves Change the Earnings Distribution?," Working Papers 2024.31, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2024.31
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    References listed on IDEAS

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    More about this item

    Keywords

    Temperature; labour market; wages; occupational transition;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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